Cost of living crisis: Snapshot of how biggest squeeze in 60 years is set to batter millions of Britons
Families and individuals across a wide economic spectrum are set for a financial savaging
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Millions of households across the UK are bracing themselves to feel the pain when the cost of living crisis deepens next month.
Energy bills will skyrocket from 1 April when the current price cap is lifted, while national insurance contributions are set to rise four days later. Petrol prices and food costs are all already climbing steeply.
Taken together, it all means the country is set to experience the worst financial squeeze in 60 years, according to the Institute for Fiscal Studies. Some 2.5 million families will be plunged into fuel poverty by the spring, the Resolution Foundation think tank predicts. Food banks are already recording unprecedented numbers of visitors.
But, while this will inevitably be a crisis that hurts the poorest the most, the suffering will be deep and widespread.
Families and individuals across a wide economic spectrum are set for a financial savaging, while independent businesses face a fight for survival amid the crunch of rising bills and reduced customer spending money.
“By the time we get [to April], millions of people will be getting increasingly desperate,” said Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, in one grim analysis. “Over time, we’ll see the impact spread increasingly to people who have tended to think of themselves as a relatively comfortable, as they start to find it increasingly difficult to make ends meet.”
Today, in a bid to understand the sheer magnitude of the coming crisis, The Independent speaks to five people from five different walks of life to find out what it will mean for them…
The single parent
Kirsty Ferguson describes herself as lucky: she owns her own home, works a good job in the charity sector and has a sister who is always there to help her and her two sons, aged 14 and 12.
For the past decade she has found a way to meet the family’s financial needs while working part-time hours that fit around the school day. She has performed this balancing act – some might call it a magic trick – by cutting back on non-essentials such as holidays, gadgets and even school trips. She tends to buy her clothes secondhand, and tells the lads to layer up each evening, rather than putting the heating on. “We have blankets lying in every room in the house,” the 43-year-old says.
The boys are asked to bike to school rather than catch the bus, while dinners are generally vegetarian to save on the cost of meat. “Once they leave home, I don’t think they’ll ever have lentils again,” says Ferguson, who lives in Bradford.
These sacrifices have, she reckons, always been worth it – because they mean she is there for the youngsters before and after school. “I never wanted them to be latchkey kids,” she says.
The concern is that all this will no longer be enough. As the crunch takes hold – and without the financial support of her ex-husband – Ferguson fears that even cutting to the bone will not keep the family in the black. With no state help available beyond child tax credits, the only solution may be to work longer hours beyond the school day.
“So now,” she says, “I can’t even give my kids my time.”
How does that make her feel? “Like they’re missing out because of circumstances that are beyond our control,” she says. “They’re so understanding – they once had to miss a school trip to Paris, and they didn’t moan at all. It feels so unfair that, because of all this, they’ll now have to give up even more.”
The pensioner
It was during the 2019 general election campaign that Bill Newell’s hometown found itself in the national spotlight.
The so-called Workington man – named after the Cumbrian town – was identified as the voter archetype vital to Tory success. He was northern, working class and had spent a lifetime voting Labour. He was promised economic rejuvenation if he only supported Boris Johnson.
Today, it is that exact demographic that finds itself as one of the groups on the front line of the unfolding cost of living crisis. And Newell is among the Workington men (and women) suddenly concerned for their future.
The 68-year-old grandfather – who did abandon Labour but couldn’t quite bring himself to go Blue – has worked as a part-time school caretaker since retiring as a printer. He had hoped that job along with his pension, some “minor” savings and the fact that he and partner Karen own their three-bed semi would keep them secure into their later years.
Now, that hope appears to be fading.
“I don’t want to suggest we have it harder than other people because I know there’s plenty going through worse – we’re not having to choose between eating and heating yet,” he says. “But we’re already starting to dip into our savings more and more, and there’s not enough there for that to go on long.”
What’s his back-up plan? To sell the house where he’s lived in for 40 years and downsize.
“We’ve worked hard and always tried our best to be sensible and you think you’ve done OK,” he says. “And then suddenly you’re wondering if you’ll have to give up your home.”
He estimates that energy alone will cost him an extra £1,000 a year from April. “Where can I get that sort of money from?” he asks.
It is a far cry from those hopeful days of December 2019 when Workington voted for Mr Johnson. “I think [a lot of people] wonder what he’s done for them,” says Newell. “As far as I can see the rich are getting richer – the big energy companies are still making billions – and the rest of us are being hung out to dry.”
The full-time carer
Three weeks ago Jane Holter’s car broke down. The brakes went. Her partner Carl Preedy knows what’s wrong and could fix it himself. “Only the parts we need cost £233,” she says. “We don’t have anything like that sort of money.”
The vehicle – a 2002 Vaxhaul Zafira – will stay sitting outside their housing association home in Eastbourne until, says Holter, “a miracle happens”. She and Preedy will walk everywhere instead.
This family of four – Holter, Preedy and their two children aged 21 and 18 – are, by their own admission, already living on the financial margins.
Holter is a full-time carer for her elderly mother who has Parkinson’s. Preedy works 15 hours a week as a school caretaker having lost a second part-time job during the pandemic. Together, between her carer’s allowance (£67 a week) and his wage, they bring in £800 a month. But, by the time rent, council tax, gas and water bills, food shops, a small catalogue debt, phone charges and a prepaid electricity meter are all covered, there is nothing in the pot. Worse still, the family have been told the rent is going up from April.
“We don’t have anything more to cut,” says Holter. “We don’t have the heating on anymore at all. I try not to use the tumble dryer because that gobbles up electricity. We only really buy milk, bread, butter and vegetables from the supermarket. Everything else, we get what we can from food banks.”
In desperate times, she is considering desperate measures. “Disconnect the fridge to save electricity,” she says. “Less showers to save water. We might have to sell the car.”
The family is keen to stress they are doing their best to manage. The two youngsters have both recently found work after leaving education, while Preedy remains hopeful of getting a second job. They have approached the Citizens Advice Bureau to take advice on managing their money.
“But everything is so hard,” says Holter. “There is always another expense coming down. You finish every day shattered just from trying to get by.”
The small business owner
At his Catalonian restaurant and deli in Liverpool city centre, Peter Kinsella is doing everything he can to mitigate the vertiginous rise in costs.
Menus will now experiment with different (less expensive) cuts of meat; less micro cress will be used as decoration on dishes; and breakfast opening hours have been axed. Even the recipe for the homemade mayo has been changed to use a touch more sunflower oil and a touch less olive. “It’s about trying to be imaginative to avoid passing on costs to customers,” the 58-year-old says.
As an independent business owner, Kinsella – who opened Lunya with wife Elaine 12 years ago – is facing a three-way hit from the crunch.
Firstly, bills are going up. Electricity has risen from £48,000 a year to £159,000 for the restaurant, while gas will rise from £12,000 to about £40,000 as of next month. Almost all the business’s 57 food suppliers have written to Kinsella over the past year to say their prices are increasing. “Even the cost of napkins has gone up,” he says.
The second hit comes from the fact the current VAT and business rates holiday – implemented during the coronavirus pandemic – is coming to an end this month, while the national minimum wage is going up.
And the third factor is that less disposable income in people’s pockets will probably mean less money spent more generally on eating out.
“It’s a pretty awful combination,” concludes Kinsella. “Especially when you think this comes after two years of struggling through various lockdowns.”
He believes Lunya will be resilient enough to weather the storm but admits the challenge is so daunting he has taken to economic modelling. As such, he has worked out that, if customer numbers are what he hopes they will be over the next 12 months, the business should turn a £250,000 profit. If they fall by just six per cent, however, that profit margin collapses to zero.
“Hospitality is an industry that is always precarious,” the grandfather-of-one says. “But it feels especially tight right now. I’m not sure everywhere will survive.”
The young professional
When Sharron Spice first works out how much more she will be spending on essentials in April compared with the same time last year, she draws a sharp breath. “My God,” the 34-year-old says.
Her energy bills are set to rise by £26 a month, while the service charges at her Enfield flat has just been put up by £160 a quarter. She estimates she is already spending £20 a month more on petrol and a tenner a week extra on her supermarket shop. “Everything’s going up,” she says.
All in all, she reckons she’ll be forking out an extra £1,500 a year on necessities by the summer. “I guess I’ll be stopping my weekly takeaway,” she says. “Netflix is going to have to go.”
The squeeze feels especially brutal because it comes just as Spice was beginning to get back on her financial feet after being hit especially hard by Covid-19.
She was made redundant from her job as an office manager at a consultancy firm in October 2020. After half a year on universal credit, she changed career path to become a full-time youth worker. She also acts and writes, and has, in fact, just written a play about her experience on benefits.
“It was the most depressing time of my life,” says Spice who was supported by the Trussell Trust charity. “I was having to sponge money off friends, go days without electricity, go shopping late at night to get food when it was reduced to clear. I felt destitute. The whole benefits system needs reforming.”
Now, while she hopes the coming crunch won’t result in quite such personal hardship, she does nonetheless face the future with some trepidation. “Young people are working as hard as they can just to stay afloat,” she says. “It’s almost impossible to save or be prudent or [work towards] feeling financially secure. And that has a huge impact on your mental health because you are constantly worried about what’s round the corner. You’re constantly worried if you’ll be able to afford to live.”
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